2010 Policyowners' Examining Committee Report
Every year for more than 100 years, Northwestern Mutual has invited a committee of policyowners to assess the Company’s strengths, opportunities and strategies and to challenge management in new ways. This demonstrates the essence of a mutual company: namely, an organization operated for the benefit of those who collectively own it – the policyowners. As members of the 2010 Policyowners’ Examining Committee, we were pleased and privileged to spend five days in the home office meeting with senior management, field representatives and emerging company leaders. All of them shared candid, informative insights and responded to our inquiries with transparency. We felt their passion for our Company and its mission to help clients achieve their financial security goals.
Pictured left to right: Ralph A. Weber, a founding member of trial law firm Gass Weber Mullins, Milwaukee, Wisconsin; Sidney Dillard, head of the Corporate Investment Banking Division, Loop Capital Markets, Chicago, Illinois; P. Russell Hardin (chair), President of the Robert W. Woodruff Foundation, Atlanta, Georgia; Timothy J. Wallen, Chief Executive Officer and Principal NAI MLG Commercial, Brookfield, Wisconsin; Randall Schilling, President and Chief Executive Officer of Candlestiq, St. Charles, Missouri.
A principle of mutuality is that Northwestern Mutual serves generations of clients – past, current and future. The Company’s mission is timeless: It must be there to fulfill its promises to every generation. While the Company is an industry leader today, we encourage it to maintain its strength and vitality by continuing to grow. As a practical matter, future growth will enable Northwestern Mutual to take further advantage of scale to enhance its position as the industry’s low-cost leader and continue to invest in relevant products and services.
We were pleased to learn that Northwestern Mutual continues to implement a growth strategy while maintaining an unmatched position of financial strength in its industry. Led by an experienced management team, Northwestern Mutual has a well-defined corporate strategy to deepen client relationships, grow its distribution system and broaden its reach in the marketplace.
Northwestern Mutual has evolved from its roots as a life insurance company to become a financial security provider. Today, the Company addresses clients’ changing financial security needs over a lifetime by offering relationship-based, expert guidance through its exclusive network of financial representatives and top-quality insurance and investment products. The Company’s investment in developing and maintaining a top-quality, proprietary financial planning tool is strong evidence of its commitment to holistic financial security.
In the past year, the home office took steps to strengthen its alignment with the field. The Company created a department to integrate financial planning and product sales and streamlined its support of the field to better meet the needs of financial representatives and clients. We look forward to monitoring how these and related initiatives increase the productivity of veteran financial representatives.
In addition, the Company increased its efforts to deliver client service and communications in a manner that reflects the client’s perspective and complements the field-client relationship. In today’s technology-driven environment, we encourage the Company to continue to invest in technology, including electronic statements and online and mobile client interfaces, to meet the growing expectations of clients for real-time information about their financial security.
To deliver financial security to more people, the Company is working to increase the number of financial representatives in its exclusive distribution system. Widely recognized as a competitive advantage to the Company, the distribution system’s vitality is critical. To foster growth of the field, the Company has implemented new incentives for network office leaders to recruit and develop promising talent over the next ten years. This effort is showing early signs of success.
As the Company assists the network office leadership in this endeavor, we encourage it to be intentional about recruiting and retaining women and people of color in order to broaden the reach and impact of its relationship-based network. The Company’s unique and award-winning college internship program offers an excellent opportunity to introduce Northwestern Mutual to a wide range of candidates.
Central to the Company’s mission is the belief that every life matters. To carry out its mission, the Company needs to broaden its reach in an ever-changing marketplace and access underserved markets. We define these as both geographic and demographic markets where the Company’s penetration is below its national average or where the additional market growth opportunity, in absolute size, is significant. We note that Northwestern Mutual has implemented pilot programs to develop effective strategies for penetrating underserved markets. We encourage the Company to expand upon and accelerate efforts to deliver financial security to a broader array of clients. We believe a presence in these markets positions the Company for long-term growth that reflects the changing demographics of our country.
The Company’s recent efforts to raise brand awareness help lay a foundation to increase its visibility and broaden its reach to more clients. We note the opportunity to build on the Company’s presence in the marketplace and amplify its impact by taking a strategic approach to the Northwestern Mutual Foundation’s investments in the communities it serves.
We have the highest level of confidence in the management of the Company. We applaud new Chairman and CEO John Schlifske and his leadership team for their focus on leadership development, accountability and alignment of compensation with performance throughout the organization.
One of the things that impresses us most is management’s execution of a comprehensive growth strategy while maintaining the fundamentals of the business. Management views the Company’s enduring financial strength and mutual values as guardrails that guide how the Company should grow. Management’s discipline is evident in the Company’s current managed expense budget, which is lower than managed expenses at the end of 2007. Continued expense discipline will be fundamental to the Company’s long-term financial strength and future growth.
Management actively evaluates the ongoing and potential changes to the regulatory structure in which the Company operates. As the political and regulatory environment changes, we are confident that management will remain vigilant to identify potential risks and advocate for sensible regulations and tax policy.
Northwestern Mutual has differentiated itself as a company intent on delivering financial security to its clients through one-on-one relationships between financial representatives and their clients employing a comprehensive planning process. Be assertive in achieving your own financial security. Ask your financial representative how Northwestern Mutual can help you realize your financial security goals through the actions you take today.
As policyowners, we all can play a part in helping our Company deliver financial security to more people. The next time your financial representative asks you for a referral, consider it your opportunity to introduce others to our exceptional Company.
Report submitted December 1, 2010